\u3000\u3000 Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) (000893)
Core view
Historical disputes have been completely resolved, the burden has been laid down, and we can move forward easily. Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) fell into shareholder disputes in the early stage. First, after the failure of fixed growth in 2015, the liquidated damages of Dongling industry, the major shareholder; Second, performance compensation for failure to fulfill performance commitments. Between Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) and multiple shareholders. At present, the disputes between the company and shareholders of all parties have been completely resolved. As of October 12, 2021, the company has received compensation from ten parties including China Agricultural Group, totaling about 611 million yuan. As well as the default fine for the failure of the fixed increase of the original major shareholder, a total of 115 million yuan.
With the introduction of strategic investors, the company ushered in rapid growth of production capacity. From 2016 to 2018, the production capacity will be increased to 250000 T / a by relying on its own hematopoiesis. The original production capacity of the company was only 100000 t / A. due to the failure of fixed growth and lack of funds, the company can only rely on existing funds to slowly increase the output through technological transformation. In 2018, the output reached 221000 tons. In 2019, Guofu investment will be introduced to increase the production capacity to 1 million tons. Through strong post investment management, strategic investor Guofu investment led other shareholders and management of the company to divest loss making businesses and focus on potash fertilizer. In addition to the technical transformation and efficiency increase of the original capacity of 250000 tons, the total capacity has been expanded to 1 million tons. At present, it has entered trial production. In the future, the company’s production capacity will expand to 3 million tons. In October 2021, Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) started the fixed increase project again. After the reorganization, the company’s potash reserves will increase rapidly, reaching more than 5 times the reserves before the transaction, becoming one of the largest potash mines in Asia. The company will simultaneously start the development of Pengxia nongbo mining area, and plans to form a potash fertilizer production capacity of at least 3 million tons / year in 3-5 years.
The company’s volume and price rise, and its performance is expected to usher in leapfrog growth. In terms of price, the international price of potassium chloride has continued to rise since 2021. As of January 17, 2022, the CFR price in Southeast Asia was reported at US $600 / ton, a year-on-year increase of 155%. After 12 years of downturn, the price of potash fertilizer is now in the upward channel. With the continuous fermentation of sanctions in Belarus and the growth of spring farming demand in the northern hemisphere, the tight balance between global supply and demand will intensify. It is expected that the potash fertilizer industry will continue to boom in the first half of 2022. In terms of output, the company’s production capacity is about to be released. After the 1 million ton project is completed, the production capacity will be four times that of the original. Therefore, under the background of both volume and price rising, the performance is expected to usher in leapfrog growth in 2022.
Investment advice
We maintain our profit forecast in the first coverage. It is expected that the net profit attributable to the parent company in 2021, 2022 and 2023 will be 807, 1140 and 1305 million yuan respectively, and the corresponding EPS of the net profit attributable to the parent company will be 1.07, 1.51 and 1.72 yuan respectively. With the continuous improvement of corporate governance and the continuous prosperity of the industry, we are optimistic about the development of the company and give a “strongly recommended” rating.
Risk tips
Repeated overseas epidemics, uncertainty of asset restructuring, fluctuation of potash price and change of exchange rate.
